A $1.05 million settlement between former Bear Stearns Cos. hedge-fund managers Ralph Cioffi and Matthew Tannin and the U.S. Securities and Exchange Commission was approved by a U.S. judge in Brooklyn, New York.
Cioffi agreed to pay $800,000 to settle the suit and Tannin agreed to pay $250,000. U.S. District Judge Frederic Block initially had described the accord as “chump change.”
“Having carefully reviewed the parties’ submissions the court is constrained to accept the settlement,” Block said in his ruling today.
“In doing so it notes the limited powers that Congress has afforded the SEC to recoup investor losses -- as well as obstacles that it has placed in the path of litigation by the private bar -- and invites Congress to consider whether more should be done by the government to come to the aid of victims of Wall Street predators,” Block said in his ruling.
In November 2009, a federal jury in Brooklyn acquitted Cioffi and Tannin of conspiracy and securities and wire fraud in the first criminal trial stemming from a federal probe of the collapse of the subprime-mortgage market. The men managed two hedge funds that filed for bankruptcy in July 2007.
In addition to the criminal case, the SEC filed a related civil suit. The parties told Block of their proposed settlement on Feb. 13, the day the case was set to go to trial.
The SEC alleged in their complaint that the two men misled investors about the funds’ deepening financial troubles and their own holdings in the investment pools.
Edward Little, Cioffi’s lawyer in the SEC case, said he was pleased with the accord in which neither Cioffi or Tannin admits or denies the allegations. Little said he doesn’t think Block was referring to his client when he spoke of “predators.”
“This is a good settlement based upon what I think are the realities of the case,” Little said in a telephone interview. “I don’t think the judge is commenting on our client specifically. I think he’s generally talking about the powers of the SEC.”
Susan Brune, Tannin’s lawyer, said in a statement, “With the swift jury verdict of acquittal in the criminal case and now this SEC settlement, Mr. Tannin is pleased to have resolved these matters.”
Cioffi and Tannin were indicted in June 2008, a year after their hedge funds failed. Bear Stearns collapsed less than a year later and was bought by New York-based JPMorgan Chase & Co. (JPM)
As part of the accord, both men agreed, without admitting or denying the SEC’s allegations to a consent judgment in which Cioffi agreed to pay $700,000 in disgorgement and $100,000 in penalties. Tannin agreed to pay $200,000 in disgorgement and $50,000 in penalties.
Cioffi agreed to an administrative order that bars him from participating in the securities industry for three years and Tannin agreed to be barred for two years.
John Nestor, a spokesman for the SEC, didn’t return a voice-mail message seeking comment on the judge’s approval of the settlement.
The case is Securities and Exchange Commission v. Cioffi, 08-cv-2457, U.S. District Court, Eastern District of New York (Brooklyn).
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